Child Tax Question

My wife and I have a joint savings acct in which we earn about $5000/yr in interest. Can we add our newborn child as a joint account holder on this savings acct so that we cab save on taxes on about $1700 of the interest that can be credited as the child's earnings. Is there any other way that I can reduce the tax bill with reference to the birth our beloved child. Any advice is greatly appreciated

What you can do is put the savings in the child's name and the child's social security. For 2008 the kiddie tax laws work like this. If the account is in your child's name (and he is under the age of 24) the first $950 of interest earned is tax free, the second $950 is taxed at the child's marginal rate (10%) and anything above that amount is taxed at the parent's marginal rate. For 2007, the max was $1700 and under the age of 24.

Congratulations on your new child!

-Joe

I believe you can add anybody you want to your bank account as a joint account holder.

Just bear in mind that this means they can also the empty the account, at will, whenever they want, however often they want. The baby (who will probably be at least a pre-teen before they figure out they can steal all your hard-earned money without any cost to themselves) is as equally an owner as you and your wife.

I know it's hard to look into that tiny face, and see (potentially) a person who could hate you so much as to do that to you, but you wouldn't be the first parent to have that happen.

In short, just to save taxes, this is a really bad idea. Penny-wise, but pound-foolish.

Josehdegroff,

I believe that for 2007, the age you are referring to is under age 18.

In 2008, for dependent students this age will be under age 24.

oops. Thanks, that is what I meant. I was in a hurry when I wrote it.

In response to Puck:

I *think* (I'm not positive) but it doesn't matter if the child is on the account, you still cannot impute the interest to your child since he didn't earn any of the money. I know this is how it works with estate planning. Some people think that if they put their heir as a joint owner that estate taxation will be eliminated. They are dead wrong. I would assume it's the same for interest on a bank account.

-Joe